German Bundesbank President Jens Weidmann. Photo: Reuters/Kai Pfaffenbach

This is Handelsblatt’s lead item in its morning blast email and I am told that it is accurate. Note the timing: Berlin wants to take over the ECB in 2019. All depends on the September election, to be sure, but the core scenario is that Merkel is returned and forms a “black-gold” coalition with the Free Democrats.

The election is becoming something of a referendum on tax cuts, with SPD candidate Martin Schulze bitterly opposed. If Merkel wins, there will be a fiscal stimulus (tax cuts plus spending), and Germany will tell the rest of Europe: “We did what you asked us to do in reducing our fiscal surplus. Now the negative interest rate regime has to go.”

This would resemble the Mundell-Volcker twist of the early 1980s — fiscal stimulus with tighter money — and the Euro would have to rise. Everyone would be happy (except maybe the Italians): Trump would get a weaker dollar, EM would benefit from the weaker dollar, and the European recovery could manage with EUR/USD perhaps 10% higher.

The Chancellor and her minions in the Finance Ministry evidently have a grand plan: to move a German into the top spot in the European Central Bank in 2019. For that reason the Spaniard Luis de Guindos is supposed to become Vice Presiden of the ECB in 2018, to mollify Southern Europe. For the same reason, Germany will refrain from advancing the present number two in the ECB banking supervisory division, Sabine Lautenschlaeger, as a candidate for the top regulatory job.

All of this power diplomacy should open the path for Bundesbank chief Jens Weidemann–an implacable critic of the present ECB chief Mario Dragio, who has let the emerging printing press run so long and so loudly as to damage all the soundproofing.

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